Strategy Tragedy - Part 2

Exactly what is a strategy?

OK… so it seems not everyone shares the same level of moral outrage that I do over the abuse of strategy …… and I graciously accept the “constructive” feedback that I should get a life and there are much more important things to be worried about….

But I still believe in sunk costs, the Easter Bunny and that someone, somewhere actually reads these posts…. on we go …. So exactly what is “Strategy”?

I feel compelled to first share my favorite, and recently discovered, book on strategy…. with the surprising title What is Strategy – An Illustrated Guide to Michael Porter. It is an illustrated cartoon story of Acorn Enterprises developing their strategy – unfortunately it is only available in hardback……. it is fun, easy to understand and easy to apply….  It isn’t perfect, but it is very, very good.

In my opinion a real strategy must have five elements:

1.     Context 

2.     Competitive Advantage

3.     Choices/Bets

4.     Human element

5.     Execution 

Context - Porter’s Five Forces is, in my opinion, the best and easiest framework for establishing context for a strategy. The five forces are shaping how a company must compete – now and in the future are:

•  Suppliers – how powerful are the suppliers to an industry or company – how much leverage do they have?

• Substitutes – How easy is it (now and in the future) to find another way to meet the customer need the company satisfies?

•  Customers/Channels – How much power do the customers and channels have – how will that evolve?

• New Entrants – How easy is it for new companies to enter in the industry – any significant barriers to entry?

• Competitors – How do the existing players compete?  Nothing is worse for an industry than a couple of dumb competitors – or ones who don’t care about profit.

Many have argued that Porter missed the including the regulatory environment and how it will evolve as a critical dimension of context – I agree with this.

Of course, the context is never static and never certain. So betting on the future context and/or adapting to it is part of the strategy game.

Competitive Advantage
Staying with Porter for the moment ….like strategy, the words “Sustainable Competitive Advantage” are casually thrown around in business discussions. But it boils down to a very simple concept. What elements of the business are demonstrably better than competitors? 

This is tough – very few businesses actually have a clear advantage in one or more elements of the value chain.  Compounding this is very few executives can be objective about whether or where their business has an advantage.  As soon as you start hearing the shallow cliches of “we have great products”…..“our customer service is the best” …..“we have a strong brand” you know you have hit the no strategy zone.

Choices /Bets
It is often stated that the hardest part of developing an effective strategy is making explicit choices – and specifically deciding what NOT to do. Being all things to all people is a recipe for disaster. Which customers, which products, what prices, what level of service?  What are the explicit tradeoffs or bets are being made about the business? If you cannot find some concrete choices or tradeoffs – there isn’t a strategy. I personally find the Treacy-Wiersema framework found in the classic “The Discipline of Market Leaders” to be the best overview of choices….  since the future is uncertain, these choices are frequently bets on how the context will evolve.

Humans
All the great strategies ultimately depend on humans to get things done. We don’t yet have a company run by HAL … as far as I know. Getting multiple humans organized and working collectively together to the best of their abilities is very difficult.  All strategies must accommodate or be shaped by the talent, culture, organizational model and ultimately the leadership. Machiavelli seems to be the most common reference point. I think W.C. Fields is equally helpful.

The test for a strategy is an explicit plan for talent and a clear organizational/operational  model that fits the strategy.  Again, cliches like “People are our most important asset” or “our people are the smartest, most loyal, best looking”, etc. is a red flag for an incomplete strategy.

Execution

"A good plan violently executed now is better than a perfect plan next week."
General George S. Patton

Delivering on a strategy is tough…..It entails discipline and relentless focus on details, goals, metrics and results. It is not glamourous or sexy… and for some it is even boring.

The best treatise on execution, in my opinion, is the aptly named. Execution: The Discipline of Getting Things Done. Perhaps some elements need updating given our current digital world.

There is an often held belief that one must trade off short term results to execute a strategy.  I could not agree less….. Bill Green the former superstar CEO of Accenture frequently said – “we must have a foot in today and a foot in tomorrow.” Executing successfully today is a critical to building the muscles for the strategy, testing the assumptions behind the strategy and funding the future.

Finally the perpetual question of agility and changing a strategy….. We live a volatile and dynamic world ……the context for a strategy can change dramatically in a very short period of time – COVID and the war in the Ukraine are perfect examples. But for most organizations changes in the context call for adapting the strategy or adjusting execution on the strategy. In the world of startups is an exception…. Where companies may rotate through multiple strategies before finding the right vein of opportunity.

That’s it ….. couldn’t be simpler !
It occurs to me that I have referenced books and frameworks that are all over 20 years old ! Surely something new and better has come along ! Suggestions ??

Thoughts for a Friday…..

Walt